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Trade associations : why not cartels?
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0020-6598; 1468-2354
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International economic review, 2021, Vol. 62, No. 1, pp. 47-64
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LEVINE, David K., MATTOZZI, Andrea, MODICA, Salvatore, Trade associations : why not cartels?, International economic review, 2021, Vol. 62, No. 1, pp. 47-64 - https://hdl.handle.net/1814/68436
Abstract
The relevance of special interests lobbying in modern democracies can hardly be questioned. But if large trade associations can overcome the free riding problem and form effective lobbies, why do they not also threaten market competition by forming equally effective cartels? We argue that the key to understanding the difference lies in supply elasticity. The group discipline which works in the case of lobbying can be effective in sustaining a cartel only if increasing output is sufficiently costly ‐ otherwise the incentive to deviate is too great. The theory helps organizing a number of stylized facts within a common framework.
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First published: 30 September 2020
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This article has been accepted for publication and undergone full peer review but has not been through the copyediting, typesetting, pagination and proofreading process, which may lead to differences between this version and the Version of Record.